Report shows New Zealand could do better

By JIM EAGLES

New Zealanders may not be hungry enough for economic growth to accept the changes necessary for it to happen, suggests a Report Card on New Zealand's Economic Reforms published today.

They might, instead, be happy to accept slower growth as the price for avoiding challenge and change.

The report, by Australian economics professor Wolfgang Kasper, and written for the Business Roundtable, scores New Zealand's economic policies and looks why they have not produced faster growth.

Its score card (see table) gives New Zealand only a pass mark overall.

It concludes that while reasonably good economic policies were put in place in the period 1984-94 - earning the country a high ranking in several international surveys of economic freedom - they were never really sold to the community, were too inconsistent and have been too subject to tinkering by politicians to be fully effective. As a result New Zealand has "consistently shown up as a country with less growth than its freedom rankings might lead one to expect".

But Kasper says there is no fundamental reason why New Zealand could not perform a lot better economically.

"Somewhat more impressive growth benefits may yet materialise if policy makers and voters can control their opportunistic instincts and keep a steadier hand on the tiller."

Kasper wonders whether the reason that is not happening could be because New Zealanders may not be as "hungry for growth as people in similarly free societies in the Asia Pacific region".

In particular he questions New Zealand's commitment to a free-market economy.

"Competing in the open global economy and at home is rewarding in terms of growth, job creation, life opportunities, longevity and social optimism.

"But rapid growth is not cost-free. It requires the present generation to make the 'savings sacrifice', forgoing present satisfaction to accumulate human, financial and physical capital.

"It challenges comfortable and familiar ways, as well as established power structures, and it requires structural changes and a willingness to accept the costs and risks of exploring new ideas."

Kasper, who is emeritus professor of economics at the University of New South Wales and senior fellow at the Centre for Independent Studies in Australia, acknowledges that it is entirely up to voters to decide between "community-wide competition and fast growth on the one hand, and the protection of a more familiar, seemingly more secure life with modest prosperity on the other".

For example, he said, Tibet opted for low growth for many years, and Tasmania and the Middle East were doing just that now.

"In the final analysis, one has to respect popular sovereignty and accept that the New Zealand electorate might prefer protection and copious redistribution combined with slow economic growth.

"All that positive economic analysis can contribute to the debate is to insist that a community cannot have, for long, both redistributive intervention and rapid growth,"he said.